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Optobear

How Many Years Of Gains Knocked Off?

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Just got to wondering about FTSE falls,

the level is currently at something like 5170 and you have to go back three years to July 2005 to get that level. So three years gains gone. (at this point, someone can jump in and tell me I'm ignoring dividends, and so being unfair... well let's keep the argument simple for now).

But going back three years means that money in the FTSE could have sat in the bank for 3 years earning interest, so I ought to reduce the 5170 FTSE, to 5170 / (1+5%)^3. In words, I need to discount back to the value of 5170 allowing for the lost interest. That means an equivalent FTSE price of 4466, and for that I need to go back until July 04, but then I have four years of lost interest, so I need to go back to 4253, that takes me back to Sept 03, but then I need five years of lost interest....

The point is that this fall in the FTSE has (allowing for lost interest) has wiped out over 5 years of stock-market returns, and that is big! I agree that dividends ought to figure, and that I ought to consider the actual available savings rate, but I think it makes little difference, the point is that this is big. The FTSE has really taken a drubbing, a five year pasting.

For houses the story is different for a number of reasons, the data (unadjusted Nationwide) only sees current falls wipe out 18 months or so of increases, but the data is very lagging, and the market price very unreliable at the moment. So I can't do the simple sum (because the numbers aren't available - and I would need to factor the value of the utility of owning the house.)

But if housing falls off as severely as the FTSE - then we would be looking at least at 35% falls, if not 50%...

35% drops in house prices wouldn't surprise many on here, but interesting to consider that the FTSE has already taken a loss that has wiped out 5 year's of gains.

Thoughts?

Optobear

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that podcast series Bubb referred to and Avid Fan provided the link for has some excellent analogies/comparsions. If you've left your money in either, or both over the period of the last four years, you've been mugged basically. :(

Edited by Converted Lurker

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People are going to be getting sod all when they come to claim their pensions.

As planned.

Massive issue this and not many commenting about it, when the yearly projections start falling on the door mats of the sheeple maybe that will be the trigger for street protests, which will come soon people are getting more angry day by day.

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One financial guy on Bloomberg this AM said the RBS share price was the same today as it was 12 years ago. All that growth blown away in less than a year :o

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People are going to be getting sod all when they come to claim their pensions.

As planned.

have you ever said anything of any truth since your time on the board?

Edited by Noel

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One financial guy on Bloomberg this AM said the RBS share price was the same today as it was 12 years ago. All that growth blown away in less than a year :o

Does this take into account dividends and also the rights issue?

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All of the growth over the past ten years has mostly been made debt profit, the more we indebted ourselves to spend the more profit companies made. Now we can't borrow the huge profits have dried up overnight. So in fact the growth of the ftse over the past couple of years has merely been an illusion.

The economic commentators have been very quite over the effect on pensions, I've been highlighting this problem for well over a year.

Anyone coming up for retirement over the next couple of years is going to be royally screwed.

The govt is clueless over what to do, although to be fair the Tories aren't coming up with anything either but then again if they open there mouths they could blow the next election, unlikely but possible. There plan will be simply say nowt.

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Halifax figures last week were back to mid 2006 prices , imo if a seller needs to sell the've got to price at mid 2005 prices to even have a remote chance of selling now ...........

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Massive issue this and not many commenting about it, when the yearly projections start falling on the door mats of the sheeple maybe that will be the trigger for street protests, which will come soon people are getting more angry day by day.

It might, indirectly start driving the market down. Many companies will have pension deficits, and the need to repair those will cause profits to drop. I know that many other companies have closed their schemes, but they presumably have liabilities over existing members.

The other scary thing is companies that have sold their pensions to Investment banks... goodness knows what financial chicanery is involved there, and how it will play out with big FTSE falls.

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The Local Government Pension Scheme was £122-130 Billion as of 2007, or £2033 each for 60 Million people. They have 3.5 million members or 34K each per annum.

Something of this size is spread to local admin of 99 regional pension funds, to avoid the State controlling the entire market, in addition each fund could have up to 50% in the FTSE 100 shares from looking at more open EU Public Sector funds.

From the growth through investments reported for the LGPS they have to have been dipping into markets, looking at local sectors some have 8% of the total in property funds, I saw 15% of the total spread around the major banks, 15% in a global equity fund etc. This group of 99 funds must be losing money every day.

My point being there are huge amounts of money being lost, and inflation can't be helping with RPI linked payouts.

Also there is very little information on the LGPS collated.

Does this take into account dividends and also the rights issue?

You can get the Adjusted close for any stocks or indexes which will include dividends or splits.

Edited by maxwell

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Does this take into account dividends and also the rights issue?

I don't think so. Just pure share price. The city man said he would be buying into RBS and other banking stocks for dividends etc, not near-term share price growth.

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I don't think so. Just pure share price. The city man said he would be buying into RBS and other banking stocks for dividends etc, not near-term share price growth.

Oh yes, they'll be in position to pay dividends, that is why all the banks are desperately raising equity!!! What planet does he live on? Losses on UK mortgages and UK originated mortgage back securities, equals bad debts = losses and not profits. Then there is rebuilding the balance sheet.

No, I see no prospects for the banks except years of losses and years of low dividends. That is why no one wants to own the wretched things. Banks are measured in terms of return on regulatory capital, and the capital ratios mean that during a down-turn they make poor returns on the large capital employed. No way around that, they need to hold the capital, and they can't offer returns because the credit losses eat up profit.

In a past existence I worked out that one of the major UK clearers would have done better in the early 1990s, to put have put all their deposits into a post-office ordinary account rather than run the business that they did.

Banks in a downturn mean lots of capital tied up, credit losses, equals miserable return on capital, and bank actually worth less than their capital... very bad news.

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Oh yes, they'll be in position to pay dividends, that is why all the banks are desperately raising equity!!! What planet does he live on? Losses on UK mortgages and UK originated mortgage back securities, equals bad debts = losses and not profits. Then there is rebuilding the balance sheet.

No, I see no prospects for the banks except years of losses and years of low dividends. That is why no one wants to own the wretched things. Banks are measured in terms of return on regulatory capital, and the capital ratios mean that during a down-turn they make poor returns on the large capital employed. No way around that, they need to hold the capital, and they can't offer returns because the credit losses eat up profit.

In a past existence I worked out that one of the major UK clearers would have done better in the early 1990s, to put have put all their deposits into a post-office ordinary account rather than run the business that they did.

Banks in a downturn mean lots of capital tied up, credit losses, equals miserable return on capital, and bank actually worth less than their capital... very bad news.

Good reply. Thanks for this clarity :)

I didn't read too much into what he said as most if not all the "experts" on business tv at the moment all have a VI in sucking in investors. No new money = no commissions. As I always say, if these "experts" are pushing these companies as buys, it usually means they've up and sold already and are moving on...

Bit like punters at the racecourse telling anyone within earshot that such and such a nag is a stick-on because he met the trainer in the pub last night.... ;)

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Interessing subject... but I do feel people , led by the papers, get too married to the FTSE discussion, in the same way they get carried away with the average price of houses..... unless you are buying an index neither of these things has much at all to do with making buying decisions.... you buy an individual house not an average price, and you buy individual stocks not the FTSE (unless of course you go down the index route)... just as there are examples of houses selling at or indeed over the asking price, or houses selling where you wouldn't believe any would be if you read the papers in some ways some stocks in the current have done not too badly at all (and I'm not talking about mining stocks and oil stocks).... if you want a real view of the pasting stocks have taken... then have a look at where the FTSE would have without the mining and oil stocks 12 months ago and then have a look at the same grouping now... I expect even 2004 is a pipedream on that basis.

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Anyone who got A&I (or A&E as FT Alphaville call them) shares at flotation must be feeling very nostalgic right now.

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People are going to be getting sod all when they come to claim their pensions.

As planned.

Well thank £$%3 for that.

The plan worked. Pay nothing in. Get nothing back. Excellent.

Edited by wellandpower

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Does anyone know the symbols for S&P out-of-the money put options? I'm thinking of buying a few to protect against the falling market.

Is +RDQUP a good one to use? It seems to be a Sep 30 2008 Put on SPY, but I've never bought an option before so I'm not really sure.

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  • 396 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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